Fitch Ratings Affirms Advisory Rating Assigned To Braskem.

Business Editors

NEW YORK & SAO PAULO, Brazil--(BUSINESS WIRE)--Aug. 16, 2002

Fitch Ratings has today affirmed the national scale advisory rating of 'A+(bra)' for Braskem S.A. (Braskem). A corporate reorganization involving COPENE - Petroquimica do Nordeste S.A. (Copene), OPP PP, and the special-purpose company 52.114 is expected to take place on Aug. 16, 2002, and will result in the creation of Braskem. Copene is the major shareholder of Polialden Petroquimica S.A. (Polialden) and Politeno S.A.; OPP PP is shareholder of OPP Quimica S.A. (OPP), Trikem S.A. and Copesul; and the special-purpose company 52.114 is shareholder of Nitrocarbono S.A. On Aug. 16, 2002, as Braskem is effectively constituted, this advisory rating will become the company's effective rating and, at the same time, Copene's rating of 'A-(bra)' will be withdrawn.

Braskem's rating is supported by the expectation of significant economies of scale and operational synergies; vertical integration; strong positions in domestic and regional markets; a clear, controlling shareholder structure with an emphasis on core activities; attractive local industry fundamentals; a competitive production cost profile; and proven access to the international capital markets. The assigned rating is tempered by the challenging integration process; significant leverage; exposure to volatile commodity chemical markets; refinancing risk and limited financial flexibility; domestic market concentration; cyclical sensitivity of end markets; and an uncertain macroeconomic environment.

The Braskem project involves the combination of all petrochemical interests held by the Odebrecht and Mariani groups. The entity will be the South America's largest integrated petrochemical company, encompassing six first- and second-generation companies. Braskem's production capacity will represent approximately 39% of the region's (Southern Cone) polypropylene output, 51% of its PVC and 31% of its polyethylene. Estimated revenues are supposed to be higher than BRL8.0 billion, and EBITDA will be about BRL3.0 billion through 2004.

The main issue behind the project is the conversion into cash of significant operational, commercial and tax synergies, which are projected to exceed a present value of US$949 million over 10 years. The aforementioned will benefit the company with annual cash benefits of about BRL330 million. By end-2002, Braskem intends to consolidate the minority interests in Trikem, Polialden and Nitrocarbono, into the project. The company expects the consolidation of the group companies into one entity to represent only 15% of the annual cash benefits.

As of March 2002, Braskem will be highly leveraged, with a total debt of approximately BRL5.5 billion, causing a total debt/EBITDA ratio exceeding 4.0 times (x), thus limiting the entity's financial flexibility. Fitch will keep the assigned rating to Braskem depending on the utilization of the synergy benefit proceeds to reduce its current indebtedness level. These concerns allow for the decline of liquidity and refinancing risks as well as the company's debt adequacy level to cash flow from operations. Fitch will closely monitor Braskem's credit profile progress, the fulfillment of capital structure goals, competitive position within served markets and the use of integration synergies. Braskem's competitive position will be superior to Copene's, given the project's features along with the new company's unified management.

Fitch currently assigns Copene, the main platform of the integration, a national scale rating of 'A-(bra)', which does not incorporate the effects of the proposal integration in its credit profile. In April 2002, Copene's Rating Outlook was changed to Positive from Stable, reflecting efforts made by the shareholders to that date at the integration of their petrochemical interests into the upcoming company, know as Braskem. Thus far, Proppet was incorporated by Copene at end-2001, making the company one of five second-generation petrochemical companies to be incorporated. The incorporation process is expected to generate annual benefits of about BRL15 million through logistical improvements, tax gains and better purchasing price conditions. Other present synergies of Braskem are composed of the management integration of Polialden and Conepar and better naphtha supply conditions, thus, resulting in lower working capital needs of about BRL400 million in 2002.

On Aug. 16, 2002, the groups Odebrecht and Mariani will integrate their respective petrochemical interests into Copene (100% of total and voting capital at OPP, 38.1% of total capital and 69% of voting capital at Trikem, 29.5% of total and voting capital at COPESUL and 92.29% of total capital at Nitrocarbono). Copene will then adopt the name Braskem. Before the integration, as part of management's efforts to perform the integration with transparency and shareholders' commitment to keep a certain level of financial health and liquidity ratios, Odebrecht S/A took a BRL592 million debt from OPP and Trikem through its whole subsidiary ODBPar. This debt, granted by BNDES in exchange for the equivalent amount in debentures issued by OPP, will become Braskem's debentures following the incorporation. The debentures convertible into stocks will have a five-year maturity, with bullet and interest payments at its maturity end.